Investing in Education Instead of Speculation


Welcome everyone. This is the second time I’ve been
in the MaRS Discovery District. It is always a pleasure. Toronto, and Canada in general,
is a hotspot of activity in this space. Looking around this room, one thing that really
strikes me is how diverse this audience is, in every sense of the word. So many people from so many different backgrounds,
gathered here to talk about this incredible technology. And I do want to talk about technology. When I first got into this space and started talking
about Bitcoin, one of the common misconceptions… when I spoke to a room full of people,
was they expected some kind of sales pitch. They expected [I was there to] sell [something],
a timeshare for a resort or a get-rich-quick scheme; that I was there to recommend investment
in this newfangled currency [like a] stock. Bitcoin isn’t a get-rich-quick scheme, but some could
argue it can certainly be a get-poor-quick scheme, if you don’t manage it [well]. A joke goes, how do you make $1 million by trading
bitcoin? You start with $2 million and then day-trade. Very quickly, you will lose your shirt. How many in this room, without looking at their portable
devices, can tell me what the price of bitcoin is today? How many of you know what the priceof ether is today?
How about [the price of] TheDAO? [Laughter] It is a big mistake to treat these technologies
as stocks, yet it is a common misunderstanding. They look like stocks, right? They have
a price, they trade [on the market]. They have volatility. We can look at
volume graphs and things like that. Of course, these are not equities. Bitcoin isn’t a
company, Bitcoin is an industry and a currency. And it is a technology platform. A very strange thing has happened in this space,
[when a technology] has a tradeable instrument. We haven’t seen that before. When the internet [was
being built], you couldn’t buy “$INTERNET” and trade it. ‘Oh look, Yahoo launched something.
I bet my internet stock [will] go up.’ You couldn’t do that, right? Probably a good thing
you couldn’t, because boy, it would have been volatile. Bitcoin is not an index stock for the industry, even
though [the price] sometimes behaves like that. None of the [other] cryptocurrencies are that.
At a fundamental level these are technology platforms. These [traded instruments] behave a bit like
an equity, like bonds, like an index stock, [but not like] the traditional type of currency we know,
a currency with a very large economy behind it. [Right now], it is a currency with a very small
and distributed economy behind it, one that is… buffeted by daily events and media announcements. For example, when [it is announced that]
bitcoin has died again [for the hundredth time]. Some is writing [another] article already. All of these things make the price move a lot. When [a lot of people] get involved in this space,
they think, “Maybe I should invest in bitcoin.” “Maybe I should invest in ether.
Maybe I should create a portfolio.” I have spent the last four years dissuading people from
that mentality. Do not treat this as an investment. The primary reason you should
not treat this as an investment, unless [maybe] you happen to be an investment
professional, is because it is extremely volatile. You must be very careful, pick your timing right. Buy low, sell high — which is the exact
opposite of what [people do in practice]. “[The price] is going up, time to buy!
“Now it is crashing, time to sell!” [Laughter] If you guess the timing wrong,
you can lose a lot of money. [How do you pick] which thing to invest in?
Should we invest in TheDAO, invest in ether? Should you really be investing in bitcoin?
What about these new [coins] popping up? Should you be investing in initial coin offerings (ICOs)? Picking the right time and location for your investment
will determine whether you are successful or not. I say, don’t do that.
I have a much better recipe for success. Invest in something that does not require timing
[as much], that cannot be lost, seized, or forfeited. Skills and knowledge. You [don’t really] need timing to invest in learning about
this technology. Learn now and that skill will pay, possibly for years to come. If you learned web development in 1997,
you [could have a lifelong] career ahead of you, for a highly sought-after skill. If you learned how to [build] iPhone apps in 2008,
you had a massive career ahead of you. With learning these skills you don’t
need to [be as picky about] choosing. Do I learn about Bitcoin? [Do I learn about Monero]?
Do I learn about Ethereum and TheDAO? You can learn about all of these things.
These skills are highly transferable. The things you learn about [in] Bitcoin will
teach you about blockchain [systems] in general. You will learn about [distributed] consensus algorithms,
cryptography, basic economics and game theory. [You will learn about] security. All of these skills
apply to [all of the cryptocurrencies] in this space. Skills that cannot be taken from you, that
you can’t lose in an afternoon of volatility. They will apply at least for a decade, probably more,
no matter which direction [the bitcoin price] goes, no matter which direction [the price of] ether
or any of the other cryptocurrencies goes. So after all, I am here to pitch you an investment.
I’m here to tell you to invest in skills. This, my friends, is a get-rich-slow scheme. [Laughter]
If you work hard in this space, you will gain a lot. I have found that, because things move
so fast, learning is a continuous effort. Every single day, I learn something new. I have been
[focused on it] full-time for more than four years. Every day, I learn something new that re-defines
my understanding of this technology, that makes me think about it in a different way,
unveiling a new level of insight and depth. On the surface, it is [just] a currency, a payment system.
If you [only] see the surface, you’re missing everything. Underneath is this enormous, rich depth of complexity. You [may] notice, on the cover of
my book, there are leafcutter ants. On the cover of every one of their books,
O’Reilly uses an animal. I chose that one very carefully. Ant colonies are remarkable systems. The individual is irrelevant, a very simplistic organism
with a few [hundred thousand] neurons that… [will be one of the first brains to]
be simulated on a computer. These individuals follow some very specific, simple
rules, triggered by an environment of chemical sense. Within the individual, there is [not much] complexity. But you put a million of them together, they [become]
a super-organism with emergent complexity. It is [one of the] species on the planet that rivals the
social complexity and construction of human society. Leafcutter ants don’t eat leaves, they use an enzyme
to break them down and build giant breweries… to produce pulp, which is fed
to aphids they farm like cattle. They milk the aphids to get nectar,
which they feed to their larvae They are an agricultural society of enormous complexity.
None of that exists in the brain of a single ant. Distributed systems like Bitcoin, where
tens of thousands of nodes each follow… a set of well-defined and simple rules,
come together and interact [to create] vast complexity. [A digital] society [built on] human incentives
to produce this secure and trusted platform. It exhibits characteristics of applied game
theory on a massive scale never seen before. A robust [platform of trust] backed by thermodynamic
guarantees, in the case of proof-of-work. [Bitcoin] is the most secure [distributed]
system we have ever built on this planet. It took the concept of proof-of-work, which
has existed for millennia [in various forms]. Proof-of-work is evident when you look at [monuments
of] our society, [such as] the pyramids of Giza. What they say is, ‘Behold a civilization that could
marshal tens of billions of dollars worth of value, hundreds of thousands of slaves over tens of years
to produce a monument that cannot be replicated.’ Unless you put an equal amount of work in. The great Cathedral of Notre-Dame, the castles
of medieval Europe, the Great Wall of China, are [early] proof-of-work artifacts. They are monuments of civilizations that say, ‘Here is something you can only build through
a massive expenditure of resources.’ ‘It stands as evidence of our might.’ Bitcoin is the first planetary-scale proof-of-work
monument; in its footsteps, others [may] follow. Bitcoin is an edifice of security,
a monument to trust on a network scale. Once you start understanding [complex
system] interactions and game theory, human incentives and markets,
you will realize how deep this is. We’ve never seen free markets operate the way they do
with things like Bitcoin and other cryptocurrencies. Truly unfettered free markets that provide liquidity and
flexibility on a global scale have never happened before. Payment systems that span the globe without borders
or intermediaries have never happened before. We are standing on the front row of history,
creating something that will change human society. If you learn skills that help you understand [how
a system of] simple [rules] produces complexity, those skills will serve you well. You may be thinking, “But I need to be a developer
to learn these [skills],” that is not true. Sure, if you are a computer scientist, this is [maybe]
one of the most amazing [developments] to happen… in computer science since HTTP. If you are a developer and interested in
distributed systems, you can learn a lot. This is a revolutionary implementation
of [a fault-tolerant] distributed system. What if you are an accountant, a lawyer, an economist? When you first look at Bitcoin, the initial inclination
is to take the traditions in your profession… and see how that will affect Bitcoin. What will be the impact of
traditional economics on Bitcoin? What will be the impact of central banks creating
their own cryptocurrency, or banks regulating bitcoin? What will be the impact of law on Bitcoin?
What will be the impact of accounting rules on bitcoin? If that is [the change] you see,
you are missing the much bigger picture. The bigger picture is that Bitcoin will introduce a seed
of disruptive innovation in [all of these] industries. The question is not, what will the law do to
Bitcoin, but what will Bitcoin do to the law? What will Bitcoin do to banking and economics?
What will [Bitcoin and] Ethereum do to contracts? What will these new technologies do in
fields with certain methods, processes, and traditions going back hundreds of years? Disrupting computer science is not a big deal,
because we barely have any traditions. This is a space that only has about 60 years of history.
What happens when you disrupt law, with 4,000 years? And we are disrupting those spaces.
Let me give you several examples. Blockchains [enable] new economic
tools we have never seen before. I coined the terms ‘computational microeconomics’
and ‘computational macroeconomics,’ to describe just two of these new fields. Today, the study of macroeconomics involves
the ex post facto analysis — six months after the fact — by statistical approximation of the
velocity activities of an entire economy. With blockchains, we can do real-time macroeconomic
[analysis]. This has never happened before. We never had the opportunity to look at economy,
study the velocity and inflation rates in real time. We could do that with blockchains. in the study of microeconomics, the activities
of a company, an industry, or [small] market, the best we could do [before] was ex post facto analysis,
six months after the fact, with statistical approximation. But no more. With blockchains, we can look at impact
on specific markets and companies in real-time. We will need to start thinking about real-time
accounting, [streaming money], and providing… information to consumers so they can evaluate
the activity of companies and industries. We’re reinventing [economic] accountability
and transparency, turning it on its head. We could simultaneously provide very strong privacy
to individuals, [as well as] a strong impetus towards… transparency and accountability for social organizations
and governments, the opposite of what we have today, which is how it should be. Looking at these industries with hundreds of
years of tradition, it is important to realize that… the traditions, methods, and tools used in law,
economics, accounting, and even computer science… It is not about the tools. This is a point we often miss. A characteristic [mechanism within] any profession
is to establish traditions which propagate the tools. out of those structures of permanence, through
academia, professional certification, and regulation. The more enmeshed you are in that profession,
the easier it is to forget why these processes [exist]. Why do we have these tools? What were the goals? We have become so attached to the means
that we have forgotten why we are doing it. I can’t tell you how many times people
tell me that blockchains need identity, as if identity was the goal. Identity is a means to an end, a means of establishing
the second-order effect of reputation. Reputation is a means of establishing the third-order
effect the [accurately measuring] the risk of default. You don’t really care who someone is,
you care whether they will pay you next month. We have become so attached to the means, we forgot
about the goal. The goal is [predicting] default risk. We have associated [identity] so completely with
[the financial system] that we can’t even imagine… another way of protecting against default
risk [anymore] other than full identification,. even with all the problems
which come with that [model]. Yet with a multi-sig contract, I [could] protect against
default risk with a completely anonymous party. I don’t need identity to achieve my goal. In looking at these technologies, we must
[address] the goals we are trying to achieve. Do these technologies give us a way of achieving those
goals with fewer side-effects and greater efficiency? If the answer is ‘yes,’ feel free to [disrupt] five-hundred-
year-old traditions if they don’t serve you [anymore]. Feel free to sacrifice the sacred cows of accounting,
law enforcement, economics, and computer science… if they do not serve you. Now we have a new set of tools. If we carefully study
these tools, we can learn how to apply them in ways… that completely change the structure of society,
that allow us to achieve the real goals of other fields. It is very difficult to step outside of tradition,
training, and professional development [pathways] [where maybe you have a] sense of camaraderie. When you step outside of traditions in your profession,
you may be ridiculed, ostracized, and called a fool. Have faith, because most of the great people in this
world, who did great things to change the world, were called fools by all of their peers:
Edison, Ford, Tesla, Marconi, Maxwell, Einstein. None of them were greeted with open arms
and accolades by their professional peers. They were ostracized, ridiculed, and called fools… because their ideas offended hundred-year-old,
sometimes thousand-year-old traditions. Be the fool that is right.
The best way to do that is to invest in learning. Invest in learning the really subtle, deep nuances
and amazing insights this technology [has to offer]. They are absolutely going to change our world.
Thank you. [Applause] [NOT EDITED] So I think we do have a bit of time for questions. [I] can get a time check Okay, we have ten minutes so we can take a few questions from the audience anybody have a question for me Yes microphone coming to you, just one second Mic phones behind me it’s a little brown. Thank you. Thank you so much. That’s number eight the audio deck. Thank you and number seven go This is a first Q&A session of the day, so we’re just going to iron out some wrinkles there. Go ahead sir. Okay great Thanks for the great talk um. I’m just curious if you could comment on the dow I’m shocked and surprised that I would be the first question you bring up I’m conflicted on the dock I’ve been watching this with great fascination um Metaphor disclosure, I am without open folder. I bought um You know I’m a whale in Dallas faces. [I] own $40 worth of doubt okay I know, it’s your nology so I thought that because as I I invest in a number [of] different crypto currencies because in all of these systems The best way to learn is to do Right and in order to do you have to hold the token if you want to write an enduring contract you have to have either if you want to use – or Monero, or bitcoin or storage coin or whatever you have to own the token so I did by [Dhow] [Tobi’s] I also work people on Social Media that This is the first one. It’s completely untested and It will probably be extremely Risky [I] Did not expect it to blow up within just four weeks of watch that [was] quite fast But you know one [of] the things I said is that [the] [most] interesting lessons come not from successful from failure if you think that this is a particle physics Experiment. The really interesting science happens when you analyze the Debris of a fired entire explosion crank you smash Two particles together create a very big bang and then you look at what comes shooting out of that? Collision Well, we’re going to be studying the Debris of the firing collapse of the dow for years And it’s going to teach us a lot [about] Governance. [I] think it’s important to realize [that] if you look at this one perspective of capitalism you need destruction in order to learn and One of the things that is [unique] about all of these systems is we’re not talking about them. We’re not theoretically analyzing them We’re doing them, and that’s the only way to learn and sometimes that means spectacular problems like this and I think that’s okay as long as you go into it to knowing the risks and And really people should understand the risks before they get involved now. How is this going to be resolved? [there] are no good options at this point [there’s] a lot of people who suggest that perhaps. It should be allowed to fail [that] it’s a great security valatie for the person who discovered the flaws and that the investors caveat emptor knew what they were getting into Are they saying that this should precipitate a soft fork followed by a hard fork and other interventions in the etherium chain? The idea is appealing it sets up a terrible precedent That may cause more problems than it solves, and I’m not going to take you the position because I have the luxury of not being Either a minor or one of the etherium core developers who has to make this very [difficult] decision [I’m] going to watch with [interest], but there are no good options in the end though I don’t think this changes the the fundamental Nature of these things Smart contracts are Fascinating they will have an enormous impact on law on Commerce on the [internet] of [things] on many other technology fields the implementation distributed autonomous organizations either as investment vehicles or as new forms of social [organization] for entrepreneurs for cooperatives for Any form of governance based? Social entity [all] of these things are amazing and they both happen again and again and again and more [of] them will blow up spectacularly and we will learn you know even even anger and taught us something if not at least to improve our accounting standards and practices right and you know we have Four of the great accounting and management consulting firms here today [Ten] Years ago number five whoops So you know sometimes that’s the price you pay for innovation all right? Let’s think there one more question in the back there So I’m speaking from one of the accounting and consulting firms. You’ll have enough so this sort of I now like a year ago [Climbs] folks would not know about blockchain and now I get into the meeting and everybody is like This is it. I’ve read so much about that But then I’m wondering this is the height That’s an operating into it and I see proof of concepts being done but if there are to be scared that it’s at least five years of aliens what I see like good blockchain survived that long and what would [it] take fundamentally one or two examples or Events that will actually make it mainstream and people will start off from real things rather than just really hyper order I think you’re absolutely right the hype around blockchain is entirely out of sync with [the] actual implementations with one [exception] and That exception is the bitcoin blockchain you can also say perhaps with two exceptions is [aetherium] is also They now have has become a [large-scale] viable production system with with still some growing pains but definitely something to watch carefully, [so] there are a couple of really important block chains in the [world] today [and] Other than that we’re seeing an enormous amount of hype. I think part of [that] represents just kind of the general genomic conditions [if] you [have] a lot of money and in many corporations today a lot of money is that is the situation because of free money and stimulus and low interest rates that we’ve been in now for six or seven years What do you get invested in equities? That’s a bubble real estate. That’s a bubble student loans. That’s a bubble auto loans That’s a bubble bonds. That’s above all the corporate bonds. That’s a bubble and so one of the problems We have in all the western developed economies Is that we have a lot of money chasing very little yield and that tends to create these? Exuberance –Es, and so people are looking at blockchain and say [ok] maybe fintech is the place where we might get some yield? [and] I think the investment has far outpaced the reality on the ground which will eventually correct But if you look at the broader space you have to realize there are some real block chains changing things in a very real way and Those block chains are the open Transnational Borderless open access open innovation permissionless block chains Such as bitcoin and [aetherium] and others that are setting the stage for real change with real applications today [A] lot of hype, but [also] a [Seven-year] experiment that refuses to die Continues to deliver more and more innovation over here and will continue to surprise people [5] minutes, let’s take one more question and then we’ll wrap it up. Maybe two questions if we have [a] quick one Pay address, thanks for the talk. Do you mind commenting quickly on? Alternative consensus mechanisms are being proposed in different blockchain environments And maybe how that impacts you know what your view is under the private versus public blockchain spaces on. Thanks, I? Think [that] since its algorithms are really a very interesting area. It’s basically a new science started in January 3rd 2009 with [1] and if you look at the the number of academics [big] academic papers published in this space and growing at A hyperbolic rates at the moment so hundreds and hundreds of phd dissertations and papers on Consensus algorithms in the last year, and I only expect that pace to increase I expect we’re going to see entire degrees Master’s degrees perhaps or [postgraduate] and Phil’s or phds focused on consensus algorithms There are many interesting experiments in that space but to me the really important thing [is] running your experiments in the wild at scale with real actors real money at stake And seeing how it survives in those conditions This is not a theoretical science This is an experimental science where we can run global scale experiments? And prove these systems in real terms, and I think that that’s really to use the trite expression where the rubber meets the road so until we see [large-scale] deployments of Practical use of novel consensus algorithms. I know one that works today, and that’s proof of work We’ll see what comes next [that] [doesn’t] mean You can’t do it another way, but [I] think it’s also important [to] recognize that the different consents of software those produce different Characteristics and features proof-of-work produces thermodynamically guaranteed immutability which is something do any other way? [and] Maybe with proof of sake we’re going to see [different] results different features different characteristics This is a broad ecosystem in which different systems will [specialized] for fitness to a particular niche application use case and There’s plenty of room for a [lots] of competition. This is not the old [zero-sum] National Currency game where in any particular domain there can be only one and it’s a Winner-takes-all That’s not what we’re [doing] here. It’s completely [different] Let’s take one [more] question and then we’ll wrap it Hi, so, I know that Decentralisation is the ultimate and final goal. I know you made mention of breaking in challenging traditions I do feel that a radical change in transformation to this can be accepted and adopted with ease or [do] you feel that a more gradual transition is the more logical [road] with more honest and transparent? centralization methods of methods and practices for Mainstream Public adoption I think neither is really the correct answer first of all I [don’t] think you can have gradual transformation a history shows [us] that disruptive Innovation never works in a gradual fashion revolutionary change if you read about You know the philosophy of science? You read news if you read the history of science what you will see is this form of punctuated Equilibria Where you have the Sabbath school and tradition establish? Kind of a plateau where ideas are relatively sale for very long periods [of] time and then a little smart knocks everything out of iquilibrium [it] gets very chaotic for a short period And then it resettle [xin] to a new norm [we] see that again and again in science. We also see it in technology. We also see it in politics We see it in Society gradual is not the way of this world What you have is? systems that build up energy within them until they reach a tipping point And then some event you never know what kind of events will be triggers that tipping point And you have a sudden cascade into a new reality We will not see a gradual transition into a new world Through these technologies and part of the reason is there are many places in the world where people will not wait? Where mainstream adoption is not going to be done because of a whim? It’s going to be done because of a desperate needs the talk to a Venezuelan an argentinian a brazilian a kazakh a ukrainian perhaps even agree or a cypriot and they will tell you that Looking at these types of technologies as a Safe-haven as an exit as a safety valve from failing Monetary systems is a very real possibility and when you have that level of desperation [there’s] nothing to stop people from adopting them now. I can guarantee [that] we do not need acceptance We do not need The participation of the old system. We do not need the permission of the traditional systems in order to succeed people will use these things because they are useful and they will use them because they can opt in and choose to use them when They feel they are ready when [we] give them a use case when we give them an application that is sufficiently compelling To overcome their comfort zone, and then they will find a way to use these technologies But I certainly don’t expect that we will see this primer really driven by Traditional institutions gracing us with permission and acceptance so that we can innovate from within disrupt to the disruptors creates change from Within Organizations that stuff doesn’t happen in reality Larger organizations can’t do that and they get disrupted from the outside most of the time very painfully and few of them survived in their original form so Start learning the skills polish up your resume and get ready for a [rollercoaster]. This is going to be fun All right, thank you very much. We’ll close the questions there

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